As you get older, one thing you may want to start doing is planning for Medicaid. Medicaid is helpful for paying the cost of nursing home care and other medical treatments, but you do need to qualify.
In order to qualify for Medicaid, you need to have minimal assets and income. If you have too many assets, then you will not qualify and may find that you have to spend down your own assets before you can start using Medicaid in the future.
Why is an irrevocable trust the right option for estate planning?
The reason that irrevocable trusts make sense for estate planning is because they take assets out of your name. With an irrevocable trust, you cannot make changes to the trust after it is established. What that means to the state and government is that you cannot get those assets reestablished in your name after qualifying for Medicaid. Essentially, they no longer belong to you and cannot be included in the value of your estate.
Revocable trusts, on the other hand, do allow you to make changes to them down the line and will generally be included in the value of your estate. If your revocable trust has thousands of dollars in assets, they could push you over the limit and make it harder to qualify for Medicaid.
Irrevocable trusts give you control over assets while removing them from your estate
With an irrevocable trust, you generally maintain control over your assets until you pass away or the terms of the trust are met. For example, you may state that the trust holds your home and will pass it on to your child upon your death. Until then, you can remain in your home. Additionally, the value of the home won’t be counted against you when you try to get Medicaid as long as it was placed into the trust before the Medicaid look-back period.
This is just one example of why an irrevocable trust is a good choice. The right trust can greatly reduce the value of your estate while protecting the lifestyle you want to maintain while qualifying for Medicaid.